To the Director of Labour Market Enforcement, here’s my message as a compliance expert

Reassuringly to those of us who want change in the contractor market, Margaret Beels, the Director of Labour Market Enforcement is calling for evidence to help inform the UK’s Labour Market Enforcement Strategy for 2023/24, writes Crawford Temple, CEO of the largest independent assessor of payment intermediary compliance Professional Passport.

The main topics Beels is focusing on include the evidence of the scale and nature of the labour non-compliance threat, including whether it varies across the UK, along with the challenges in terms of compliance and enforcement for the three enforcement bodies under her remit.

They are HMRC National Minimum Wage/National Living Wage (NMW/NLW), Gangmasters and Labour Abuse Authority (GLAA) and Employment Agency Standards (EAS). 

More of the same is something UK contracting could do without

But what should Beel focus on? Well, first she might like to consider that we have seen a proliferation of regulation and legislation over the last 40 years, as policymakers seek to catch up with the fast-moving pace of the modern working landscape. 

It means that a catalogue of legislation has resulted in a series of unintended consequences that has not served the contracting sector and the whole supply chain well. Government has ignored advice from industry and experts, so that legislation continues to fail to address the underlying issues and challenges that our industry faces, namely non-compliance, transparency and enforcement.

Regulation, right? Wrong

Just recently we have heard an increasing number of calls to regulate the umbrella industry in response to widely reported non-compliance and malpractice. It is of course vitally important for the reputation of the entire sector that we call out any bad practice, but I don’t believe that regulation is the answer. 

Proactive enforcement is the answer -- but it is simply not happening. As a result, non-compliance and illegal practices are being allowed to thrive which is costing the Treasury some £1billion a year in lost revenue.

As compliance moves up the agenda, it has never been more important that everyone in the supply chain works together to develop good working practices. We know that there are cases of bad practice among a minority of umbrella businesses which have grabbed the headlines. But there are also a large number of highly compliant organisations working ethically and correctly to provide a high-level quality service for clients and contractors.

Visible enforcement

Enforcement is expensive, of course, but without it there is little incentive to play by the rules. In fact, I would argue that the lack of enforcement has fuelled the incentive that has allowed non-compliant providers to flourish. And, with the introduction of a Single Enforcement Body comprising the Gang Masters Labour Abuse Authority, the Employment Agency Standards Inspectorate and HMRC, I would urge Beels to ensure that enforcement does not become more diluted, as the departments work out how best to navigate the issues together.

What’s clear is that the current enforcement strategies do not work. They serve to incentivise non-compliant offerings and fail to support the compliant parts of the sector. The lack of visible enforcement, the lengthy delays in taking any action, and targeting the workers for recovery, all serve the interests of those seeking to circumvent, or disregard, the rules.

Coupled with a series of ongoing rule changes such as the revised off-payroll legislation that extended its reach in April 2021 to the private sector, the incentives for abuse have become even greater and the issues that have made the headlines recently around holiday pay, skimming, mini umbrellas, and disguised remuneration schemes are the result.

Acting on data

However, we know that HMRC holds the appropriate information that would make it easy to pinpoint non-compliant schemes and close them down faster. 

Real Time Information (RTI) reporting that was introduced in 2013 along with the 2014 Intermediary Reporting provides HMRC with two sets of data that gives a unique insight into the market and the supply chain. Matching that data should set alarm bells ringing, and help HMRC to identify a dubious provider and take the appropriate action.

Working together

We need joined-up thinking whereby all the appropriate government departments should seek to develop closer relationships with compliance bodies and the wider sector bodies.

Industry compliance bodies, in particular, set their own standards and developing a more structured approach would allow the departments to inform and be informed on pressure points in the market. This latter point is especially important.

Moreover, the nature of the compliance accreditations allows faster reactions to market distortions, so they would help limit and restrict market access to those who apply these ‘have I got a good idea for you’ arrangements.

Going further, and including the wider sector bodies would provide the broadest reach for messaging across the sector, so as to provide a benefit to policymakers to design and then implement an agreed compliance standard that works for all.

Finally, Beels should use the strongest weapon

And lastly but absolutely not least, transparency is the strongest weapon against non-compliance. A collegiate approach is the best course of action and I hope that Margaret Beels will listen to the evidence and take steps to devise a strategy that will work well for all those throughout the supply chain who work hard to raise standards while she gets rid of those who seek to perpetually break the rules, behave unethically and do untold harm to the UK’s contractor workforce.